Section 36 stay conditions must prevent duplicate recovery and preserve restitution of amounts paid during challenge.

Kolkata Unique Hospitality LLP (“KUH”) and Mayfair Hotels & Resorts Ltd. (“Mayfair”) entered into an Operating Agreement dated 8 November 2017 concerning operation of a hotel at Kalimpong for 25 years on a revenue-sharing basis.

The sole arbitrator issued an award dated 10 June 2025 granting KUH monetary relief of Rs.39,68,35,000/- and granting Mayfair relief of Rs.9,40,91,678/-, resulting in a net monetary award of Rs.30,27,43,322/- in favour of KUH.

Mayfair challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 and sought stay of enforcement under Section 36.

By order dated 13 February 2026, the Commercial Court stayed enforcement subject to Mayfair depositing the entire net monetary award of Rs.30,27,43,322/- and paying Rs.1.66 crores per month from 1 September 2025 until disposal of the Section 34 proceeding.

Mayfair deposited Rs.25 crores, claimed credit for a further Rs.5.63 crores allegedly refundable by KUH, and continued making monthly payments at Rs.38.85 lakhs.

Whether the High Court should exercise its supervisory jurisdiction under Article 227 to interfere with conditions imposed by the Commercial Court while staying enforcement of an arbitral award under Section 36(3) of the Arbitration and Conciliation Act, 1996?

Whether the direction to deposit Rs.30,27,43,322/- required modification by giving credit for the Rs.25 crores already deposited and the disputed claim of Rs.5.63 crores?

Whether the condition requiring payment of Rs.1.66 crores per month, including its quantum, commencement date and mode of payment, constituted a lawful exercise of discretion under Section 36(3)?

Whether safeguards concerning accounting, adjustment, release, restitution and default were necessary in relation to the monthly deposits and arrears?

Section 36(2) and (3) of the Arbitration and Conciliation Act, 1996 provide that an arbitral award is not automatically unenforceable upon filing a Section 34 challenge; a separate stay order may be granted subject to written reasons and appropriate conditions.

In the case of a monetary award, the court must have due regard to the principles governing stay of a money decree under the CPC, although the CPC operates as guidance and does not restrict the discretion conferred by the Arbitration Act, as held in Pam Developments Pvt. Ltd. v. State of West Bengal.

Article 227 jurisdiction remains constitutionally available notwithstanding Sections 5 and 36 of the Arbitration Act and Section 8 of the Commercial Courts Act, 2015, but interference is highly restricted and ordinarily confined to orders patently lacking inherent jurisdiction, as explained in Deep Industries Ltd. v. ONGC, Bhaven Construction v. Executive Engineer, and Ashok Kumar Puri v. S. Suncon Realtors Pvt. Ltd.

The court may require security for the whole or part of an award, but the amount and form of security must be justified by the circumstances, as recognised in International Seaport Dredging Pvt. Ltd. v. Kamarajar Port Ltd.

Conditions imposed for staying delivery of possession may include occupation charges, but they must not be excessive, fanciful or punitive and should preserve restitution, consistent with Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd. and State of Maharashtra v. Super Max International Pvt. Ltd.

The court also possesses inherent power to order restitution where interim benefits must be restored following the final determination, as recognised in South Eastern Coalfields Ltd. v. State of M.P. and Kavita Trehan v. Balsara Hygiene Products Ltd.

The High Court held that the petition was maintainable under Article 227, but that supervisory interference required an exceptional defect in the Commercial Court’s exercise of discretion rather than a mere disagreement with the conditions imposed.

The direction to secure the full net monetary award was not inherently unlawful because the amount was kept in an interest-bearing fixed deposit under court control and was not releasable to KUH during the Section 34 proceeding.

However, Mayfair’s disputed claim of Rs.5.63 crores could not be treated as satisfaction of the security requirement without adjudication in the Section 34 proceeding.

The Rs.25-crore deposit was therefore credited, leaving a balance of Rs.5,27,43,322/-.

As to the monthly condition, the arbitrator’s assessment of Rs.1.66 crores was a relevant basis for determining occupation charges, but the Commercial Court had not adequately explained why that figure should be imposed as the condition for staying eviction, nor had it addressed the objections concerning the evidentiary basis of the hotel’s profitability and the prospective operator’s offer.

Direct payment to KUH also failed to provide adequate protection if Mayfair ultimately succeeded in the Section 34 proceeding.

The High Court therefore maintained the rate but directed that the monthly amount, and any arrears, be deposited before the Commercial Court and invested pending further orders, with release permitted only against adequate security for restitution.

It further directed an account to prevent double recovery or duplication between the monetary corpus, monthly occupation charges and payments already made.

The requirement to secure Rs.30,27,43,322/- was maintained; Mayfair was given credit for the Rs.25 crores already deposited and directed to deposit the balance of Rs.5,27,43,322/- within eight weeks.

The disputed Rs.5.63-crore claim was left open for determination in the Section 34 proceeding.

The monthly rate of Rs.1.66 crores was maintained, but direct payment to KUH was replaced with deposits before the Commercial Court from the month of judgment onwards, to be invested in a fixed deposit.

The Commercial Court was directed to determine arrears from 1 September 2025, account for all payments and adjustments without duplication, and permit payment of verified arrears in six instalments.

KUH could seek release of the monthly deposits or arrears only upon furnishing an undertaking and sufficient security for repayment with interest.

The stay would cease upon specified defaults, subject to verification and an opportunity to Mayfair to show compliance.

All merits concerning the validity of the arbitral award and the Section 34 objections—including jurisdiction, termination, notice, arbitrability and procedural compliance—were expressly left open.